Finally, a look at underlying demand

The International Air Transport Association released its air freight market analysis for April 2015, showing an overall 3.3% year-over-year increase in worldwide cargo traffic. On a regional basis, however, results varied from a 6.8% decline in traffic reported by carriers in Latin America to a 14.1% increase for carriers based in the Middle East. International traffic was up 3.6% overall, while domestic traffic in April rose 0.9%.

For the first four months of 2015, IATA said worldwide air cargo traffic was up 4.3%, led by 4.8% growth in international traffic, while domestic traffic was up just 1.2%.

As IATA points out, the April data indicate a trend of diminishing demand for air freight, following a more buoyant start to the year. Two of the things buoying that start were the buildup of a substantial backlog at the US West Coast ocean ports due to labor strife, and a massive automobile recall in the US (over defective airbags) that caused a tremendous spike in demand for goods from Asia (particularly Japan) to North America. The combination of these two led to a big shift from ocean to air on the trans-Pacific lane, inflating year-over-year growth figures in the first quarter.

So, with those one-time boosts to air freight no longer playing a significant role in April, is it reasonable to assume that 3.3% year-over-year growth is an accurate reflection of the underlying demand environment, and an indicator of what we should expect for the rest of the year? Data just published by WorldACD showed worldwide air cargo volume (measured by chargeable weight) up the 3.3% y-o-y in April, exactly mirroring the growth reported by IATA, and lending some weight to the conclusion that air freight demand growth in 2015 is down a bit from the 4.5% we saw in 2014.

After balancing the impact of a variety of economic indicators, IATA concludes that, “Acceleration in the air freight growth trend is unlikely in the near term,” but that, “for 2015 overall, moderate expansion in air freight is expected alongside anticipated improvements in the global economy.” In general, this seems a reasonable position to take, given what has happened so far this year, and we would only add that, in our view, the key to the rest of the year lies in Europe. If the Eurozone economy can escape the quagmire in which it has been floundering, the whole world will breathe a huge sigh of relief, and trade will pick up worldwide.